4 ways to find the main constraint

1. Speed up the company until something stops working

Here’s the story of another client of mine, Mike.

He came to me last November needing some help with testing hypotheses.

We began to figure out what his hypotheses were. I explained the system and guided him through our process. After choosing the hypothesis together, he thanked me, told me he had already understood what to do, and left.

A month later, he came back with the words: “We haven't done a damn thing at all!”

He’d spent the entire month on day-to-day operational routines and surprise problems that popped up – leaving no time for important strategic tasks. And this was where the real work began.

The Growth Tracking involves the entrepreneur coming to see me once a week, letting me work my magic and help them craft a solid strategic plan for the week ahead. The following week, we analyze their results and repeat the process.

In this case, this first step was quite obvious.

We needed to pull the founder out of the routine operations. Fortunately, he had everything ready for this: he already had a COO, all he had to do was set some control points and tune a few processes.

A week later he returned: “I did everything we had planned, delegated operations, and there are people working on hypotheses we discussed a month ago. What do I do now? Go watch cartoons?”

Well, I’m happy to say he never had to watch a single cartoon in the six months that followed.

The next thing we did was work on his goal – 50% company growth within a year. It wasn’t a small company, but I was taken aback – 50% didn’t sound like fast growth to me.

We began to look at what opportunities they had and discovered that there were a couple of companies in the US market that, with a revenue of about $150 million, were sold for a billion dollars each. At that moment, something lit up in his eyes – because $150 million in revenue may have been a lot to him, but it was definitely achievable.

Suddenly, things got interesting.

This is what I do with companies. I kickstart the company’s actions so it runs faster than ever, and even faster yet, so that at some point things start to break – exposing the limitations that don’t allow the business to grow.

Mike’s company was a great example of that. After a couple of months, both production and marketing broke down in this company.

Everything began to crumble.

We had to halt his big $150M hypothesis, return to the core business, and begin to fix it all: marketing, production, and team management.

In just four months, the company’s revenue was higher than it had been the entire year before, despite their original 50% growth projection.

In this example, speeding up operations resulted in limitations appearing faster, and Mike, the founder, fixing them one by one as they appeared.

When their marketing began to suffer, we stepped in. Marketing provided more traffic, the load on production increased and eventually production broke down. This was the next problem to solve.

They started with hiring a new production manager and rebuilding the team overseeing the production process. Then problems on specific stages of the production process began to emerge.

One of them was missing components, which resulted in semi-finished products piling up. They were trying to speed up the production,мincrease production plans, but until the missing components problem was addressed, it changed absolutely nothing.

We solved the issue and swiftly moved onwards, increasing pressure on the production every time we fixed a new problem.

Another issue arose: one particular plant needed to respond to emails regularly because their lack of responsiveness led to production plans crumbling, stock shortages, halted marketing and huge losses.

This seemingly tiny task ended up being the most important problem the business faced that week. Once it was taken care of, production ran smoothly again.

Letting things go wrong may be daunting but it’s one of the most effective ways to grow a business. Go at full throttle, wait for something to break, fix it and go even faster until it happens to something else... rinse and repeat.

2. Find where unfinished work accumulates

Mike’s case had a great example on this.

We discovered that missing components made some stages of the production process impossible to carry out. Semi-finished products were piling up, money was going down the drain and sales were suffering because the product was rapidly going out of stock.

To identify the problem in a production sequence, look for an operation that has a lot of semi-finished products piled up right before it and ask yourself why it’s happening.

It might be that the operation is missing some components, or its throughput capacity is lower than required. It might even be too low a priority.

Fixing this operation is the key here, as it will unlock the entire process.

Here’s another example:

Imagine you have a marketing team stacking quality leads, a sales team closing deals daily and a manufacturing team churning out the greatest quality imaginable...

But it’s not enough.

The market allows for more, but your business isn’t growing fast enough.

Why?

Because somewhere down in the basement there’s an overloaded designer in charge of the presentations that sales managers send to their clients.

He’s swamped with work, so sometimes he sends these presentations a few days late.

Unfortunately, some clients can’t wait that long and go to a competitor instead.

What happens then? Sales start to plummet.

The company decides to spend plenty of time and money on sales training, refines the product to beat their competitors, increases their marketing budget to get even more leads and hires more sales managers.

It doesn’t change a thing because that poor designer can design only so many presentations. He’s got a queue of unfinished tasks. This kind of queue is often the main limitation in a system, the bottleneck, that does not allow more work to flow through. But when we find that bottleneck, things start moving.

We add another designer or create a template that sales managers can use on their own so that clients stay satisfied and don’t leave for a competitor.

This one small change leads to the next one: now sales trainings can really increase conversions, which it its turn prompts another change - marketing can now increase their lead generation budget.

Sales grow, and the new influx of capital lets the company invest in improving the product to leave their competitors far behind.

The business begins to change in a kind of snowball effect – small changes lead to larger ones, pushing dynamic business growth, greater revenue and winning the market.

Another important example of unfinished work piling up is your sales funnel. If one step in this funnel doesn’t work quite right, deals would get stuck and accumulate there.

Looking into your CRM will offer up a similar picture. Most of the steps in the funnel are empty or nearly empty, but there’s a step or two where most of the deals pile up.

Maybe it’s something like “waiting for response”, “negotiations”, or “invoice sent”, or any other step where deals get stuck.

This is the bottleneck you should focus on and fix.?

3. Find the root cause of those various problems you see

Another way to find the main limitation is to analyze the relationship between problems.

If you have a bunch of different problems in your business, there are causal relationships between them. One problem is the reason for the other, and so on. There’s often a common factor, tying them all together.

Analyzing the relationship between these problems can help you find the root cause that’s preventing your growth, and fixing it lets you immediately solve (or give an impetus to the solution of) all other problems.

This root cause is the main limitation that you need to overcome.

For an early-stage startup, the root cause of all problems is, most often, in the product value.

You’ve got problems if customers don’t need your product, if you can’t explain why they need your product, or if you haven’t figured out your Ideal Customer Profile.

Not enough value means low conversions in your sales and marketing funnels.

Low conversions lead to high turnover among your salespeople, quickly overloading HR.

If you’re creating a software product, your development team will be overloaded with requests for new features, because the focus shifts from what your ideal customer needs to trying to please everyone instead.

Among others, you’ll have issues with money and investor relations. What’s the single root cause here?

Your product value.

When you find what your customers really need, conversions will increase, salespeople will get their bonuses and stay with the company.

The pressure on HR will diminish, your product and development teams will focus on the most important functions. Investors will see growth and become happy.

Focusing on one root cause fixes several problems in different areas of your business at once.?

4. Use a standard step-by-step strategy for your own type of business

If you’re doing something that’s been done before, chances are there’s a proven roadmap to follow.

One example of it is launching a new startup or product. There’s a proven strategy for this:

First, you need to talk to your potential customers and make sure your product is going to solve a burning problem they have.

Next, you create an MVP and confirm that it solves the problem you’re addressing.

Once that’s done, you build a scalable sales process and test if you can control its economics.

AND THEN... you start scaling.

This process was described by Steve Blank and is known as Customer Development.

We adapted this process to find the core problem in the business and created a framework called The Traction Map.

It defines a sequence of 14 steps from an idea to a scalable business.

This sequence starts with a set of hypotheses for the value proposition and goes on to testing them, modeling economics, creating and testing an MVP and performing the first face-to-face sales for a proof of concept and perceived value.

Next comes building user acquisition, creating the sales process, making unit economics profitable and making sure it remains profitable while you scale your sales.

Every step in this process builds upon the previous steps. You only start building an MVP after proving that your potential customers care for the problem this MVP would solve.

You start scaling traffic only when your unit economics are profitable, so that you don’t scale losses.

You can’t start a new step until you finish all of the preceding steps.

There’s just one step you need to focus on first. This step is your bottleneck, the most important problem in your business.